The federal tax credits for electric vehicles have been a topic of confusion for automakers and car shoppers for several months. However, as of Tuesday, significant changes are being made to the credit, resulting in fewer vehicles qualifying for the $7,500 tax credit. Under the new rules, some vehicles will be eligible for a $3,750 credit, while others will no longer qualify for any credit at all.
The shift in eligibility is due to battery sourcing requirements that are now coming into effect. The recent regulations mandate a certain percentage of battery minerals and components must be sourced from North America or a U.S. trade partner. The goal of these requirements is to encourage production in the U.S. and reduce reliance on foreign sources. These regulations were part of a large climate bill that restructured the tax credit for electric cars.
The IRS is expected to publish the official list of eligible vehicles by Tuesday, but many automakers have already identified which vehicles will be on that list. This change in tax credits for electric vehicles highlights the increasing shift towards a greener economy, with many auto companies racing to meet the demand for electric vehicles and transform their workforce. As the industry evolves, it is important for both consumers and manufacturers to stay up to date on the latest regulations and requirements to ensure that they can take advantage of the available tax credits and incentives.
Starting April 18th, the federal tax credit for electric vehicles is about to go through a significant change. Currently, every qualifying vehicle gets both credits worth $3,750 each, making the total credit amount $7,500. However, after the change, starting from Tuesday, some vehicles may qualify for neither, one, or both credits. Automakers have released the list of eligible vehicles that will be impacted by the change. According to them, the following vehicles will still be eligible for both tax credits, worth $7,500: Cadillac Lyriq, Chevy Silverado EV, Tesla Model Y, Tesla Model 3 (Performance), Ford F-150 Lightning, Lincoln Aviator Grand Touring, Chrysler Pacifica plug-in hybrid.
On the other hand, some vehicles may be eligible for either $3,750 or $7,500. These vehicles include Chevy Bolt, Chevy Bolt EUV, and Volkswagen ID.4 (vehicles built in Tennessee only). The remaining vehicles, such as Tesla Model 3 RWD, Mustang Mach-E, Ford E-Transit, Ford Escape plug-in hybrid, Lincoln Corsair Grand Touring plug-in hybrid, Jeep Wrangler 4xe, and Jeep Grand Cherokee 4xe, are expected to be eligible for a single tax credit, which is $3,750.
The new changes have been announced to incentivize U.S.-based production of electric vehicle components, and the eligible vehicles’ list will be available once the IRS publishes it on Tuesday. It is expected that the new rules will create more confusion for automakers and car shoppers who are already struggling to navigate the complicated system of tax credits for electric vehicles.
Eligibility till April 18th
Starting April 18, changes to federal tax credits for electric vehicles will come into effect. Currently, every qualifying vehicle receives both credits, totaling $7,500. However, after the changes take effect, some vehicles may end up qualifying for neither, one, or both of the credits. Certain vehicles will remain eligible for both credits, including the Cadillac Lyriq, Chevy Silverado EV, Tesla Model Y, Tesla Model 3 (Performance), Ford F-150 Lightning, Lincoln Aviator Grand Touring, and Chrysler Pacifica plug-in hybrid. Others may be eligible for either $3,750 or $7,500, such as the Chevy Bolt, Chevy Bolt EUV, and Volkswagen ID.4 (vehicles built in Tennessee only).
Vehicles expected to be eligible for a single tax credit of $3,750 include the Tesla Model 3 RWD, Mustang Mach-E, Ford E-Transit, Ford Escape plug-in hybrid, Lincoln Corsair Grand Touring plug-in hybrid, Jeep Wrangler 4xe, Jeep Grand Cherokee 4xe. Additionally, the Volvo S60 (PHEV), Extended Range, and T8 Recharge (Extended Range) will no longer receive any tax credit after April 18. The eligibility of other vehicles, such as the Audi Q5 TFSI e Quattro, BMW 330e, BMW X5 xDrive45e, Genesis Electrified GV70, Nissan Leaf S, S Plus, SL Plus, SV and SV Plus, and Rivian R1S and R1T, is still unknown. Therefore, buyers interested in these vehicles may want to act quickly to take advantage of the current tax credit before it potentially decreases or disappears.